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September 21, 2004
A study supports my feeling that retailers will not make money in digital music
Today PaidContent.org published some of my thoughts on "who will make money with digital music". I said the labels will take the lion share and the retailer will be left with negative to zero margins. A study today shows this to be the case:
-- Labels Get Majority in Digital Downloads: The Independent reports that the labels take home the lion's share of the cost of a digital download -- making more money per track than they do with CDs in shops. Apple, with its iTunes, retains just 4 cents from each 99-cent (55p) track sale while "mechanical copyright" holders -- generally the record labels, who own copyright in the song's recording -- take 62 cents or more. Music publishers take the rest -- about 8 cents.
With the online sites, the copyright owners have doubled their share of royalties, even though the marginal cost of manufacturing has fallen to almost zero.
The figures also cast doubt on the viability of the dozens of companies storming into the online music market... [Sep.21: Link] | Music |
Posted by Martin at September 21, 2004 3:43 PM
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Comments
It's true that in the current market the labels hold the lion share of control over most of the music sold. The only problem for them is the coming wave of disruptive technology. Currently one of their main value adds is that they act as a filter promoting and "creating" only viable acts while others (some quality music, some not so much) are left outside of the mainstream music mechanism. The end result is the infamous "hits" system where only bands that appeal to the lowest common denominator are promoted.
This of course doesn't matter so much to 12 year old girls but I have a feeling that a lot more people would be buying music if they were given the tools to EASILY find music that would appeal to them. The easier it gets, the more you'll see the hipster mentality (finding music that is good for you apart from the mainstream) penetrate the music buying market.
The end result is a lot of power being striped from the music labels. Sure they'll make still make a lot of money pushing Britney and they'll always have their back catalogs, but their purpose of acting as a filter will be less necessary and others will step in to fill the void (assuming they continue their attitude of ignoring the cutting edge of music distribution and promotion).
As for Apple and their ilk, they opened the door but you can expect them to drop the ball at any time. Apple doesn't want to make a phone and maybe their working with Motorola is a good step in the right direction, but I have to think that globally they'll end up a bit player. Also, why would they give 5 cents per song to affiliates if they only make 4 themselves? Seems odd.
Posted by: Toby 
at September 21, 2004 4:33 PM
Sorry for the excessive paragraph spacing. I think maybe the preview is broken.
Posted by: Toby at September 21, 2004 4:35 PM
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